Grassley eyes reconciliation-bill gambit for a ban on specialty hospitals

New restrictions on specialty hospitals could be included in the Senate Finance Committee’s budget-reconciliation package that is supposed to be completed next week if Chairman Chuck Grassley (R-Iowa) has his way.

New restrictions on specialty hospitals could be included in the Senate Finance Committee’s budget-reconciliation package that is supposed to be completed next week if Chairman Chuck Grassley (R-Iowa) has his way.

But industry lobbyists say that the chances of a ban on the upstart sector continue to be slim — especially in the face of resistance from powerful Republicans in the House.

Talks continue among Grassley and his committee members on the composition of an entitlement-cuts bill, and virtually all options remain on the table, including paring reductions in Medicaid and Medicare spending, aides and lobbyists maintain. Although months of negotiations have not led to a compromise, Grassley appears to see an opening for his specialty-hospitals bill, which has failed to gain traction on its own.

Grassley has been seeking a vehicle for legislation that would at least temporarily prohibit new specialty hospitals, but he has been unable to garner much enthusiasm in the Senate. Moreover, the specialty-hospital provisions might be subject to the so-called Byrd Rule objection on the grounds that they do not relate directly to budget reconciliation.

Specialty hospitals are small facilities that focus on a single type of medical care, such as heart or orthopedic surgery, unlike large community hospitals that offer a wide array of services. Critics contend that the sector takes unfair advantage of oddities in the Medicare payment system.

Moreover, because specialty hospitals often are partially owned by the doctors who work there — and usually also practice at big community hospitals — an improper incentive exists for physicians to refer patients to hospitals in which they have a financial stake, opponents say. The specialty hospitals counter that the big hospitals are just afraid of the competition.

“We would expect that [Grassley] will try to include something on specialty hospitals in that package,” a specialty-hospital lobbyist said. The lobbyist noted that key House lawmakers are not interested in moving a companion bill and that the Bush administration is already taking steps to address many of the underlying concerns held by some members of Congress about the impact of specialty hospitals on their larger, full-service brethren.

The American Hospital Association (AHA), which supports restricting specialty hospitals, also views budget reconciliation as a possible opportunity to move against the specialty facilities, which it terms “limited service” hospitals.

“Certainly, the Congress is still very interested in this topic,” said AHA lobbyist Ann Ubl.

A spokesman for the Federation of American Hospitals would say only that its lobbyists continue to talk to members of Congress about restricting specialty facilities.

In recent months, hospital-industry lobbyists also have turned their attention to trying to influence a series of regulations emerging from the Centers for Medicare and Medicaid Services (CMS).

When CMS Administrator Mark McClellan laid out the administration’s strategy at a hearing of the Health Subcommittee of the House Energy and Commerce Committee in May, panelists seemed to warm to the idea of letting the agency handle the heavy lifting. Committee Chairman Joe Barton (R-Texas) plainly asserted that he saw no need for Congress to intervene. House Ways and Means Committee Chairman Bill Thomas (R-Calif.) has stayed out of the fray.

An 18-month moratorium on new specialty hospitals was permitted to expire in June after McClellan told Congress that the administration would not approve any new facilities under Medicare before the end of the year as CMS prepared to move forward with regulatory changes related to specialty hospitals and the hospital industry at large.

CMS has already begun the process of tinkering with the Medicare system in an effort to address the concerns of those who believe the smaller hospitals are a threat to the bigger ones.

In August, CMS published the first in a series of proposed regulations that are intended to carry out a comprehensive plan that the administration contends will remove any financial incentives to opening a specialty hospital to take advantage of peculiarities in the complex Medicare payment formula. Taken together, the rules will aim to reorganize the way Medicare reimburses hospitals, including specialty facilities, and smaller outpatient clinics called ambulatory surgical centers and to clarify the regulatory definition of “hospital” to emphasize more serious medical treatments, especially those that require patients to stay over for at least one night.